Severe Penalties for Failure to Make Payroll Tax Payments

The IRS can hit you with a 100 percent penalty, known as a Trust Fund Recovery Assessment, if you are a responsible person. While courts will focus on whether you have knowledge of non-payment of taxes, you don’t need to have performed the tax withholdings to be deemed responsible. Employers who have signature authority and fail to exercise it may be deemed liable.

When you have employees and withhold income and employment taxes, you must send an IRS Form W-2 to each employee in January following the tax year, and you also have to file quarterly returns with the IRS. Most employers hire a payroll service to do this on their behalf because the process can be complicated. If you fail to fulfill these obligations, it can be seen as a criminal matter if the failure is deemed serious enough.